Office of the Attorney General
State of Texas

Re: Authority of the comptroller to contract with paid
informants for information about revenue or property the state
may be legally entitled to recover (RQ-1302)

Dear Mr. Bullock:

You have requested an opinion on questions arising under
article 4344g, V.T.C.S., which was adopted in 1987 by House Bill
No. 921 of the 70th Legislature. Acts 1987, 70th Leg., ch. 874,
at 2971. Article 4344g, V.T.C.S., authorizes you to contract
with any person to receive information about claims for the
recovery of revenue or property which the state may be entitled
to pursue, except for property subject to escheat by the state.
V.T.C.S. art. 4344g, s 1(a). See Prop.Code ch. 71-75. This
enactment creates a financial incentive to persons who may be
able to aid the state in recovering dormant accounts. Bill
Analysis to H.B. No. 921, 70th Leg. (1987), on file in the
Legislative Reference Library.

You first ask whether this statute violates article III,
section 51, of the Texas Constitution, which provides in part:

Sec. 51. The Legislature shall have no power to make any
grant or authorize the making of any grant of public moneys to
any individual, association of individuals, municipal or other
corporations whatsoever....

This provision prohibits giving away public funds; it does not
deny the legislature the use of state funds for state purposes.
State v. City of Dallas, 319 S.W.2d 767 (Tex.Civ.App.--Austin
1958), aff'd 331 S.W.2d 737 (Tex.1960). To comply with the
requirements of article III, section 51, any contract between a
private individual and the state must serve a public purpose,
adequate consideration must go to the state, and there must be
contractual provisions designed to insure that the public purpose
is carried out. See, e.g., Dodson v. Marshall, 118 S.W.2d 621
(Tex.Civ.App.--Waco 1938, writ dism'd); Attorney General Opinion
Nos. H-1309, H-1260 (1978); H-912 (1976).

Article 4344g, V.T.C.S., provides as follows:

(a) The comptroller of public accounts may contract with any
person for the receipt of information about any possible claim
that the state may be entitled to pursue for the recovery of
revenue or other property, except that this Act shall in no way
relate to or affect property which is recoverable by the state
pursuant to Chapters 71-75, Property Code.

(b) In any contract under Subsection (a) of this section, the
total consideration to be paid by the state:

(1) shall be contingent on a recovery by the state;

(2) may not exceed five percent of the amount of the revenue
or the value of the other property that the state recovers as a
result of the pursuit of the claim about which the contracting
person provided information; and

(3) may be limited by agreement to not exceed a specified,
absolute dollar amount.

(c) Consideration may not be paid by the state pursuant to a
contract executed under Subsection (a) of this section if at the
time the contract is executed or within three months after the
date of execution, and by means other than disclosure under the
contract, a state employee has knowledge of the claim disclosed
under the contract or has knowledge of a cause of action
different from that disclosed under the contract but entitling
the state to recover the same revenue or other property. An
affidavit by a state employee claiming that knowledge under those
circumstances is prima facie evidence of the knowledge and
circumstances.

It is a public purpose of the state to locate and recover revenue
and other property to which it is entitled. See, e.g., Tex.
Const. art. III, s 49a (comptroller's duty to estimate
anticipated revenue for state from all sources); Gov't Code s
403.011(2) (comptroller's duty to adopt regulations for
collection of state revenues), s 403.055 (warrant may not be
issued to person indebted to the state); s 403.091 (transfer to
general revenue fund of balance in dormant fund); Property Code
ch. 71-75 (provisions for escheat of funds to state).

Article 4344g, V.T.C.S., authorizes the comptroller to contract
with a person to purchase information about claims to revenue or
other property which the state may have. Properly authorized
officers of the state may enter into a contract for services to
be performed for the state. Fazekas v. University of Houston,
565 S.W.2d 299 (Tex.Civ.App.--Houston [1st Dist.] 1978, writ
ref'd n.r.e.), cert. dismissed, 440 U.S. 952 (1979). This
statute makes payment of consideration contingent upon a recovery
by the state and limits it to 5% of the amount of revenue or
value of property that the state recovers. Thus, the state will
receive adequate consideration for any payment made.

Moreover, the state may not pay consideration pursuant to an
article 4344g contract where a state employee has knowledge of
the claim disclosed under the contract or other knowledge
entitling the state to recover. See V.T.C.S. art. 4344g(c).
This provision prevents the state from compensating a private
individual for information which duplicates information in the
possession of the state at the time the contract is signed or
within three months thereafter.

Section 4344g(c), V.T.C.S., also effectively prevents a state
employee from entering into a contract with the comptroller under
subsection (a) of that statute. If a state employee knows of a
claim for revenue or property which the state is entitled to
pursue, the state may not pay consideration under contract for
information about that claim. Some state employees have an
express duty to investigate and pursue claims on behalf of the
state. See, e.g., General Appropriations Act, Acts 1987, 70th
Leg., 2d C.S., ch. 78, art. I, rider 16, at 303 (collection of
delinquent judgments by attorney general); Educ. Code s 52.39
(collection of money due on student loans). Subsection (c) of
article 4344g, V.T.C.S., thus insures that the state will not pay
extra compensation to a state employee for information he has
received on behalf of the state in his capacity as a state
employee. See Tex. Const. art. III, s 44 (legislature may not
grant extra compensation to public servant after public service
shall have been performed); V.T.C.S. art. 6252-9b, s 8
(standards of conduct for state officers and employees); Penal
Code s 39.03(a) (misuse of official information).

We finally note that article 4344g, V.T.C.S., does not
establish a traditional reward program, under which the
government offers a reward to the general public, payable upon
performing a specific service, and an individual accepts the
offer by performing. See, e.g., Broadnax v. Ledbetter, 99 S.W.
1111 (Tex.1907) (sheriff offered reward for recapture of an
escaped prisoner). Under such reward programs, the contract is
formed only when an individual accepts the state's offer by
performing the requested service, and the courts have struggled
with questions of contract formation as well as the validity of
rewards under article III, section 51. See Blain v. Pacific
Express Co., 6 S.W. 679 (Tex.1887) (individual who captured one
of two criminals not entitled to half of reward offered for
capture of both criminals); Weaver v. Scurry County, 28 S.W. 836
(Tex.Civ.App.1894, no writ) (statute authorizing payment of
bounties for destruction of wild animals analyzed for compliance
with article III, section 51, of the Texas Constitution). Since
article 4344g, V.T.C.S., contemplates that you will receive
information pursuant to a contract, we need not address the
questions raised by a reward program.

You next ask whether there is an appropriation from which to
pay for information received under an article 4344g contract.
Article VIII, section 6, of the Texas Constitution provides in
part:

No money shall be drawn from the Treasury but in pursuance of
specific appropriations made by law....

No particular form of words is required to make a "specific
appropriation;" it is sufficient if the legislature authorizes
an expenditure and specifies the purpose for which an
appropriation is made. National Biscuit Co. v. State, 135 S.W.2d
687 (Tex.1940). The appropriation for the comptroller's office,
like appropriations to other state agencies, is itemized
according to programs or functions of the office. It does not
identify each salaried position or each contemplated expenditure;
nor is such minute detail necessary to comply with article VIII,
section 6, of the Texas Constitution. See S. & G. Construction
Co. v. Bullock, 545 S.W.2d 953 (Tex.1977) (appropriation from
Available University Fund for permanent improvements and new
construction may be used to pay judgment against University of
Texas for additional work under a construction contract);
Attorney General Opinion Nos. MW-251 (1980); H-1275 (1978); H-944 (1977); H-289 (1974); WW-865 (1960) (construing terms of
appropriations).

GRAND TOTAL, COMPTROLLER OF PUBLIC ACCOUNTS, STATE COMPTROLLER'S
OFFICE

(Emphasis added.)

Acts 1987, 70th Leg., 2d C.S., ch. 78, at 319 (amounts of
appropriation items omitted). Specific amounts are appropriated
for each item and the purpose of each expenditure is stated. We
find no provision which bars the use of appropriated funds to
make payments for article 4344g, V.T.C.S., contracts. See
generally, In the matter of D___ H___, 556 S.W.2d 628
(Tex.Civ.App.--Waco 1977, writ ref'd n.r.e.) (rider barring use
of appropriated funds to pay judgment unless such payment was
specifically authorized in an item of appropriation). The fiscal
note to House Bill No. 921 states that the bill "would have
negligible fiscal implications to the State...." Fiscal Note to
H.B. No. 921, 70th Leg. (1987), on file at the Legislative
Reference Library. Thus, the legislature would be unlikely to
devote a separate line item to appropriations authorized by
article 4344g, V.T.C.S. See generally Mutchler v. Texas
Department of Public Safety, 681 S.W.2d 282 (Tex.App.--Austin
1984, no writ) (appropriated funds could not be used for overtime
pay where program would cost over $4,000,000 per year and
legislature had consistently refused to fund it). Our concern is
whether there are line items in your appropriation that could be
used to fund article 4344g contracts consistent with the
legislature's intent in adopting items of appropriation.

Item 7 is subject to a rider which states that it shall be used
to administer several specifically identified bills adopted by
the 70th session of the legislature. Acts 1987, 70th Leg., 2d
C.S., ch. 78, rider 16, at 323. House Bill No. 921 is not
included in this list; therefore, we conclude that the
legislature did not intend item 7 to be a source of payments for
information received pursuant to article 4434g, V.T.C.S.
However, the acquisition of information leading to the state's
recovery of revenue or other property would fall within the
purpose of other items. The items of the appropriations to your
office reflect the functions and programs of your office. If you
reasonably determine that the article 4344g, V.T.C.S., contracts
should be handled under a particular program activity of your
office, then the funds appropriated for that purpose may be spent
to implement article 4344g, V.T.C.S. You are in the best
position to determine where this new statutory authority fits
into the overall structure of your agency, but we can suggest
some items which could reasonably be used to pay for information
leading to the recovery of revenue or property by the state. For
example, funds appropriated as item d. under "Tax Administration"
to enforce tax collection laws could be spent to acquire
information about taxes owing the state. See generally
Comptroller of Public Accounts, Budget Estimates for Fiscal Years
1988 and 1989 (July 1986), at 135 (description of Tax
Administration: Field Operations: Enforcement). Items 2e. and
2f., for in-state and out-of-state audit, might also be used to
acquire information about revenues and other property which the
state may be entitled to claim.

We do not overlook the possibility that your office has already
budgeted its appropriation so that no funds for article 4344g,
V.T.C.S., contracts are available from any of the appropriation
items which might be used for that purpose consistent with the
legislature's intent in making the appropriation. Article 4344g,
V.T.C.S., authorizes you to enter into contracts but does not
require you to do so, and you have discretion to allocate
appropriated funds to other authorized activities of your office
rather than to this one.

You finally ask whether your office would be authorized to show
the informant information otherwise deemed confidential under
sections 111.006, 151.027 or 171.206 of the Tax Code to
demonstrate that he is not entitled to compensation or is
receiving the correct compensation for the information he
furnished. [FN1]

Title II of the Tax Code contains the laws on state taxation,
including chapters 111, 151, and 171. Chapter 111 of the Tax
Code sets out the comptroller's powers and duties in collecting
taxes imposed by title II. Tax Code s 111.001. He has authority
to adopt rules not in conflict with the laws or constitution for
the enforcement of the provisions of title II and the collection
of taxes and other revenues thereunder. Tax Code s 111.002(a).
To carry out the provisions of title II he may examine a
taxpayer's books and records. Tax Code ss 111.004; 111.0041;
111.0043. Section 111.006 of the Tax Code provides for the
confidentiality of information obtained by examining a taxpayer's
records:

(a) The following matter is confidential and may not be used
publicly, opened to public inspection, or disclosed except as
permitted under Subsection (b) of this section:

(1) a federal tax return or federal tax return information
required to have been submitted to the comptroller with a state
tax return or report; and

(2) all information secured, derived, or obtained by the
comptroller or the attorney general during the course of an
examination of the taxpayer's books, records, papers, officers,
or employees, including an examination of the business affairs,
operations, source of income, profits, losses, or expenditures of
the taxpayer.

(b) All information made confidential in this title may not
be subject to subpoena directed to the comptroller or the
attorney general except in a judicial or administrative
proceeding in which this state, another state, or the federal
government is a party.

(c) The comptroller or the attorney general may use
information or records made confidential by provisions of this
title to enforce any provisions of this title or may authorize
their use in a judicial or an administrative proceeding in which
this state, another state, or the federal government is a party.
(Emphasis added.)

Tax Code s 111.006. See generally Attorney General Opinion H-661
(1975); H- 223 (1974); Open Records Decision No. 300 (1981)
(members of the public are not entitled to inspect under Open
Records Act taxpayer records in comptroller's custody which are
protected by confidentiality provisions).

Section 111.006 of the Tax Code is a strict confidentiality
provision. Subsection (c) of that section allows the comptroller
or attorney general to use such information to enforce the tax
laws in title II or to authorize their use in specified judicial
or administrative proceedings. It contains no language that
would authorize the comptroller to reveal confidential
information to an informant with whom he has contracted under
article 4344g, V.T.C.S. Chapter 151 of the Tax Code, which deals
with the administration of sales, excise, and use tax, and
chapter 171, which pertains to franchise tax liability, are
subject to the confidentiality provision of section 111.006 of
the code and include specific confidentiality provisions as well.
Tax Code ss 151.027, 171.206. The comptroller may not disclose
to an informant under a section 4344g contract information deemed
confidential under sections 111.006, 151.027 or 171.206 of the
Tax Code.

SUMMARY

Article 4344g, V.T.C.S., which authorizes the comptroller to
contract with informants to pay them for information about
revenue or property the state may be entitled to recover, does
not violate article III, section 51, of the Texas Constitution.
State employees are not authorized to contract with the
comptroller to provide such information in exchange for
consideration under an article 4344g, V.T.C.S., contract. Funds
appropriated to the comptroller's office may be used to fund
article 4344g, V.T.C.S., contracts, even though the appropriation
act does not expressly state that such contracts may be funded.
Whether a particular line item may be used to fund such contracts
depends upon the legislature's intent in adopting that line item.
The comptroller's office would not be authorized to show an
informant information that is confidential under sections
111.006, 151.027, or 171.206 of the Tax Code.

Very truly yours,

Jim Mattox
Attorney General of Texas

Mary Keller
First Assistant Attorney General

Lou McCreary
Executive Assistant Attorney General

Judge Zollie Steakley
Special Assistant Attorney General

Rick Gilpin
Chairman
Opinion Committee

Prepared by
Susan L. Garrison
Assistant Attorney General

Footnotes

FN1. Sections 154.308 and 155.185 of the Tax Code, which
formerly provided for the confidentiality of information relevant
to tax or cigarettes, cigars, and tobacco products, have been
repealed. Acts 1985, 69th Leg., ch. 58, s 44.